How can I make a loan to a friend work?
November 30, 2012 1:22 PM Subscribe
I'd like to loan someone some money (a few thousand dollars). A friend needs it to finish school, and they don't have any good, low-interest options. I don't mind losing the money and forgiving the loan if they fall into hardship, but it would be a financial blow that I want to avoid; making it a straight up gift from the getgo is not appealing.
Is it possible to have a bank or credit union draw up the loan and service it for a flat fee? Any other ways to make the whole thing impersonal, legal, and low-hassle for me, while keeping it forgiveable at my discretion without impacting my friend's credit?
Another thought: would a bank be likely to make a loan at a very low percentage interest were I to put up the entire amount as security, with the bank putting it in escrow and releasing it back to me in installments as payments are made?
Any experiences or possibilities along these lines would be welcome. I'm very interested in helping this person avoid having to borrow at high interest rates or putting it on a credit card.